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Horngren'S Financial And Managerial Accounting
Found in: Page 314

Short Answer

The adjusted trial balance of Rockin Robbin Dance Company at April 30, 2018, follows:

ROCKIN ROBBIN DANCE COMPANY

Adjusted Trial Balance

April 30, 2018

Balance

Account Title Debit Credit

Cash $4,400

Accounts Receivable 38,000

Merchandise Inventory 17,800

Office Supplies 850

Furniture 39,900

Accumulated Depreciation-Furniture $8,300

Accounts Payable 14,100

Salaries Payable 1,000

Unearned Revenue 6,500

Notes Payable, long-term 12,000

Common Stock 5,000

Retained Earnings 36,150

Dividends 40,000

Sales Revenue 178,500

Cost of Goods Sold 83,700

Selling Expense 19,000

Administrative Expense 16,000

Interest Expense 1,900

Total $261,550 $261,550

Requirements

1. Prepare Rockin Robbin’s multi-step income statement for the year ended April 30, 2018.

2. Journalize Rockin Robbin’s closing entries.

3. Prepare a post-closing trial balance as of April 30, 2018.

The net income of the company is $57,900.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Meaning of Net Income

In accounting, net income refers to the amount of money left with a business entity after the settlement of all its expenses such as selling and administrative, interest, and taxes. Net income is computed by subtracting the operating and non-operating costs from the total revenue.

Step 2: Preparation of multi-step income statement

ROCKIN ROBBIN DANCE COMPANY
Multi-step Income Statement
For the year ended April 30, 2018

Particulars

Amounts ($)

Sales revenue

178,500

Less: Cost of goods sold

(83,700)

Gross profit

94,800

Less: Operating expenses

Selling expense

(19,000)

Administrative expense

(16,000)

Income from operations

59,800

Less: Other expenses and losses

Interest expense

(1,900)

Net income

$57,900

Step 3: Preparation of closing entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Apr 30

Sales revenue

178,500

Income summary

178,500

(To close revenue account)

Apr 30

Income summary

120,600

Cost of goods sold

83,700

Selling expense

19,000

Administrative expense

16,000

Interest expense

1,900

(To close expenses accounts)

Apr 30

Income summary (178500-120600)

57,900

Retained earnings

57,900

(To transfer net income)

Apr 30

Retained earnings

40,000

Dividends

40,000

(To close dividend account)

Step 4: Preparation of post-closing trial balance

ROCKIN ROBBIN DANCE COMPANY
Post-closing Trial Balance
As of April 30, 2018

Account Title

Debit ($)

Credit ($)

Cash

4,400

Accounts receivable

38,000

Merchandise inventory

17,800

Office supplies

850

Furniture

39,900

Accumulated depreciation-Furniture

8,300

Accounts payable

14,100

Salaries payable

1,000

Unearned revenue

6,500

Notes payable, long-term

12,000

Common stock

5,000

Retained earnings (Working notes)

54,050

Total

$100,950

$100,950

Working Notes:

Computation of Retained Earnings balance:

Particulars

Amounts ($)

Opening balance

36,150

Add: Net income

57,900

Less: Dividends

(40,000)

Closing balance

$54,050

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